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Hank's unholy trinity

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This monster just won’t die. Fannie and Freddie will survive, and we missed a historic opportunity to rid ourselves of them once and for all. Holman Jenkins says as much in the Wall Street Journal earlier this week. It’s an excellent bit of analysis on the financial and political risk that the market is pricing into the mortgage giants’ shares (Freddie was selling for $3.99 Tuesday compared to $67.20 a share a year ago). One particular item of interest was his mention that the legendary Bill Miller doubled down on his Freddie stake. Yeah, he’s taken it on the chin of late (as have we all), but I’ll still trust old Bill to sniff out alpha in the most unlikely of places.

The key to the twin Fs’ survival – of course – is Henry Paulson, whom Jenkins rightly notes was granted “near-monarchical powers” in the housing bailout legislation. He describes Paulson’s thinking this way:

“I, Paulson, understand that their share prices are irrelevant as long as the government backs their debts. You, Mr. Market, are testing my will, but soon you will understand too. Then Fannie and Freddie shares will recover. Investors will realize their taxpayer-backed business model is going to survive and will step forward to provide whatever amount of capital their regulator specifies.”

Read the whole thing at


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